Hospital board OKs 9 percent increase
By Phyllis Moore
Published in News on August 9, 2005 1:52 PM
Patients will pay 9 percent more for some services at Wayne Memorial Hospital in 2005-06, but will also see infrastructure and equipment improvements that will contribute to better and more efficient patient care, officials said today.
The hospital's board of directors this morning approved a $163 million budget that takes into account increased expenses and capital needs, while positioning the hospital to seek future funding for continued improvements to the facility.
The increase will not affect room rates, officials say, but will apply to most other hospital charges beginning with the new fiscal year that starts Oct. 1.
Hospital President and CEO William Paugh said there are actually two budgets, one for the operational or normal expenditures, and another for the master facility plan, which represents immediate and long-term needs involving items such as buildings, equipment and other infrastructure projects.
The new budget forecasts a net operating income of 4.8 percent of collectible operating revenues, or almost $8.1 million. Income on investments and other non-operating revenue is projected at almost $3 million, but due to the volatility of the financial markets, officials say that income cannot be relied upon for operations.
The routine capital budget of $7.4 million includes upgrades in medical equipment, which this year includes new anesthesia machines and the latest in cardiac ultrasound technology. Improvements in the information technology area will also assist the hospital in providing more efficient and less stressful care, officials said.
But the hospital has to look further down the road, as well. Keeping a good bond rating, which is dependent on maintaining control over costs versus revenue, will allow the hospital to pursue funds it needs to buy more equipment and to improve facilies, resulting in better patient care, Paugh said.
"We're really looking over the edge of the horizon at some significant capital expenses," he said. "When we talk about positioning ourselves so that we can take on long-term debt, such as bond issues, it's different."
Wayne Memorial is a not-for-profit organization, Paugh said. The hospital must qualify for money based on its own numbers, not promised revenues from taxpayer dollars.
The master facility plan portion of the budget accounts for $16.2 million, including $1.8 million in carryover projects, an MRI joint venture and replacement of another MRI, beginning a two-year $20 million energy project and upgrades to the West Wing and projects planned in the area of ambulatory surgery and behavioral health.
Replacing the energy plant is one of the larger projects of a non-routine nature, said Rebecca Craig, chief financial officer.
"It has provided heating, cooling and electrical distribution for the main tower since the hospital moved to this site 34 years ago," she said. The West Wing energy system has been in service since 1995.
Such upgrades provide the necessary infrastructure for further improvements and expansion of hospital facilities, including the emergency department, surgery department, behavioral health and imaging services, she said.
The budget prioritizes patient needs, competitive salaries and benefits, equipment and future projects, while maintaining the hospital's financial position and credit standing, she said.
While it stacks up well against other hospitals, Paugh said, Wayne Memorial is traditionally one of the lowest in terms of rates and charges.
"According to publicly released data, in 2004 Wayne Memorial's average charge per discharge, taking into account the complexity of the treatment provided, ranked 24 percent below the state median and 44th out of the 51 hospitals in eastern North Carolina," he said.
Expenses at the hospital are predicted to increase by $8.5 million next year, or 5 percent, Mrs. Craig said.
"We would love it if we could just increase prices 5 percent and that would be enough," she said. "But we're not sure there's going to be any increase from the state this year."
More than half of the budget, 52 percent or $85 million, is designated for salaries and employee benefits. Paugh called the staff the hospital's most important asset.
"It's really about people taking care of people," he said. "Fifty-two percent of our expense budget is about getting the right people and retaining them here."
Full-time-equivalent employees will be 1,361, an increase of 12 over the current year. To assist in retention and recruitment in several critical job categories, the budget targets salary adjustments to keep pace with market conditions, Paugh said.
It also funds the continuation of the hospital's pay-for-performance program for all employees. The program addresses not only competency but the employees' approach to the hospital's customer service standards.
Dr. Joe McLamb, finance committee chairman, said one of the biggest challenges faced by the hospital is financial write-offs. He said uncollected money is expected to account for $123 million or 42 percent of the hospital's gross revenues.
The biggest source of write-offs comes from government and insurance programs that pay substantially less than hospitals charge. The largest government programs, Medicare, Medicaid and Tricare, account for nearly 85 percent of write-offs.
Bad debts, or bills owed the hospital by those who refuse to pay, are projected to be down slightly from the current year, but still make up $15.4 million. Financial counselors hired by the hospital to work with patients have been helpful in reducing that amount, administrators said.
The effort has afforded the hospital to increase collection efforts for the patient portion of bills closer to the point of service and better identify those who qualify for the enhanced Wayne Medical Assistance Plan.